Labor: New Technologies can Present Legal and Business Risks

"Smart phones" (Blackberrys, iPhones, and Droids, to name a few) are cell phones on steroids. Most smart phones have email, texting, video display, internet access and all of those cool apps. Employers are already enjoying the benefits of employees' use of smart phones, but often without realizing that there are also legal and business risks involved too. Now is the time for employers to make strategic decisions about smart phones and establish policies, procedures and other practical steps in order to keep up with the new technologies that employees are using in connection with work.

Employers reap enormous benefits in terms of improved customer relations, expedited work flow and enhanced bottom lines when employees use personal and company-owned smart phones to call, text, e-mail and tweet with clients, co-workers, suppliers and the public. These devices allow employees to access the internet and company computer systems 24/7 from virtually anywhere in the world. Moreover, smart phones are just the tip of the iceberg; other emerging technologies such as iPads, cloud computing (the use of servers and software owned by third-party vendors), Wikis (interlinked collaborative websites) will help employees work more efficiently, but also further complicate things for employers.

Not surprisingly, smart phones and other new technologies do not come without a price--they present employers with some major compliance risks. These risks can arise whether the smart phones are company-owned or personally purchased by employees and include the legal liabilities that can arise when:

Managers improperly try to determine whether employees are using smart phones for work purposes

The first step for employers is to determine how and to what extent employees use smart phones for work. As a general rule, whenever hourly-paid non-exempt employees work on smart phones during off-duty hours, they must be compensated unless the time spent working on the phones is de minimis. Employers can avoid some of these wage-hour issues involving non-exempt employees by either (i) prohibiting them from using smart phones for work while off-duty or (ii) utilizing the "fluctuating workweek" method, which requires, among other things, a written agreement paying the non-exempt employee a salary for all straight time hours worked in a week and providing overtime pay at a fluctuating rate for more than 40 hours of work in a week. However, the time that a non-exempt employee merely has to carry a smart phone, but does not use it for work is usually not compensable as long as he or she is free to engage in personal activities.

Exempt employees' work-related use of smart phones can also be problematic. Under the Fair Labor Standards Act, exempt employees who perform no work in a workweek or during absences of one or more full days due to personal reasons other than sickness or disability do not have to be paid for such time off. However, if exempt employees use smart phones to call into work, check work e-mails or respond to job-related texts during those absences, refusing to pay them can jeopardize their exempt status and leave employers open to overtime claims.

How big is this potential problem? The average white-collar employee (whether exempt or non-exempt) spends 50 minutes a day sending e-mails after work and more than 25 percent of them stay in contact with work during vacations and on days off, according to recent surveys. Employers should review their payroll practices and other procedures to make sure they do not deter exempt and non-exempt employees from putting in extra work on their smart phones when it is appropriate, but at the same time do not create legal risks by improperly monitoring smart phone usage and failing to pay these employees for time spent on smart phones based on misconceptions about the law and the extent that employees are using smart phones for work.

Smart phones are signaling a change in the way employees work and employers need to answer this call with new strategies that include up-to-date policies, supervisor training and protocols on monitoring the usage of new technology.

Paul E. Starkman

Paul Starkman is one of the leaders of the labor and employment law practice group at Pedersen & Houpt.